Opportunities for Carbon Offsets through

California’s Cap and Trade Program

Joel Levin

Vice President

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Offsets for Compliance

• Compliance obligation can be fulfilled with a mix of allowances and offsets

• Up to 8% of compliance obligation can be fulfilled with offsets

– Example: If a facility has emissions of 100,000 mtCO2e, then it can use up to 8,000 offsets for that period

• Offsets can only come projects under approved protocols

• Project must be registered with a CARB-approved registry

– We expect to receive CARB approval in July

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California Offset Demand

Compliance Period Year Allowance Budget(mt CO2e)

Total Offset Demand

First(narrow scope)

2013 162,800,000 25,800,000

2014 159,700,000

Second(broad scope)

2015 394,500,000

91,784,000 2016 382,400,000

2017 370,400,000

Third

2018 358,300,000

83,104,000 2019 346,300,000

2020 334,200,000

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The Reserve: Background and History

• Nonprofit organization founded as the California Climate Action Registry by state legislation in 2001– Encourage actions to reduce emissions

• By developing protocols to track GHG emissions and reductions and having those emissions verified and publicly reported

• Renamed and expanded in 2008– Mission remains to encourage actions to reduce

emissions

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Organizational Objectives

• Ensure that emission reduction credits (offsets) have true environmental integrity

• Show that carbon offsets can be a useful tool in addressing climate change

• Provide a offset registry that is rigorous while streamlined and user-friendly

• Link voluntary carbon markets with emerging compliance markets (CA C&T, WCI, RGGI…)

• Provide expertise on offset standards and policy

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What We Do

1. Develop High Quality Standards

– Convene stakeholders and lead development of standardized protocols for carbon offset projects

2. Manage Independent Third Party Verification

– Training and oversight of independent verification bodies

3. Operate a Transparent Registry System

– Ensure ownership to emission reductions

– Maintain a public registry of approved projects

– Issue and track serialized credits generated by projects

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• Forestry (Reforestation, Improved Forest Management, Avoided Conversion)

• Urban Forestry

• Livestock Methane Capture

• Ozone Depleting Substances

• Landfill Gas Capture

• Organic Waste Digestion

• Coal Mine Methane

• Nitric Acid Production

• Organic Waste Composting

• Rice Cultivation

Current Protocols

ARB Approved

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Reserve Stats

CRTs registered 24.3 million

CARB-approved CRTs 8.2 million

CRTs retired 3.6 million

Projects submitted 474

Registered 136

U.S. States with Projects 45

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Buying & Selling CRTs

• Must have an account with the Reserve to hold CRTs• No financial transactions within the system, only

transfers between accounts– Not a trading exchange for spot transactions

• Forward sales are very common• How to trade?

– Purchase directly from a project developer– Purchase through a Trader/Broker/Retailer– Purchase futures on an exchange

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Eligibility Rules

1. Location U.S. and its territories

2. Project Start Date No more than 6 months prior to project submission*

3. Additionality Exceed legal requirements

Meet performance standard

4. Regulatory Compliance Compliance with all applicable laws

Crediting Period 10 years, renewable one time

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Livestock Projects

• Definition: Installation of a biogas control system (BCS) at a dairy or swine operation where manure was previously managed through open, uncontrolled anaerobic storage (lagoon)

• Methane must be captured and destroyed

• Performance standard– Installation of the BCS for destruction of methane from cow or

pig manure– Baseline condition must have been open, uncontrolled

anaerobic storage in a lagoon, tank, or other similar system

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Organic Waste Digestion Projects

• Definition: Digestion of one or more eligible organic waste and/or agro-industrial wastewater streams in an operational biogas control system (BCS) that captures and destroys methane gas that would otherwise have been emitted to the atmosphere in the absence of the project.

• Regulatory test is applied separately to each waste stream

• Performance standard– At least one eligible organic waste stream is digested in the project’s

biogas control system (BCS)

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OWD: Eligible Waste Streams

• MSW Food Waste: Non-industrial food waste consisting of uneaten food, food scraps, spoiled food and food preparation wastes from homes, restaurants, kitchens, grocery stores, campuses, cafeterias, or similar institutions

• Agro-industrial Wastewater: Organic loaded wastewater from industrial or agricultural processing operations that, prior to the project, was treated in an uncontrolled anaerobic lagoon, pond, or tank at a privately owned treatment facility. Excluded from eligibility are wastewaters produced at breweries, ethanol plants, pharmaceutical production facilities, and pulp and paper plants.

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Composting Projects

• Definition: The diversion of one or more eligible waste streams to an aerobic composting facility where the waste is composted in a system that complies with Best Management Practices (BMPs).

• Regulatory test is applied separately to each waste stream

• Performance standard– Project diverts and composts at least one eligible feedstock

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Composting Projects: Eligible Waste Streams

• MSW food waste and non-recyclable food soiled paper waste are eligible.– Why? Because very little of these waste streams are currently

composted.

• Exception: Grocery stores– Grocery store waste streams are eligible only if you can

document that they were previously going to a landfill.– Waste from newly opened stores is also eligible.

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Contact Information

policy@climateactionreserve.org

www.climateactionreserve.org

523 W. 6th Street, Ste. 428Los Angeles, CA 90014

213-891-1444